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Post by Cody Ellsworth on Mar 7, 2009 3:36:57 GMT -6
It seems impossible to even discuss this! Oh well. Obviously unification isn't absolutely NEEDED or something. But hey, it'd be fantastic for us all. Some very talented people left the kingdom.
Anyways, I probably shouldn't have brought this up, but hey, someone needs to talk about this. Problem is, is that it takes two to strike up a conversation. I believe that Captain Mick is correct when he says things won't change until certain people are out of power though.
Lets just forget that I brought this up. For now. Back to the subject this thread was intended for. Good ole' fashioned Monetary Economics!! *scratches head*
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Üc R. Tärfâ
Talossan since 3-8-2005
Deputy Fiôván Secretary of State
Posts: 760
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Post by Üc R. Tärfâ on Mar 7, 2009 13:58:46 GMT -6
Proprieties of the money assumed in the model:- neutral money: without privileges for those citizens who have as macro-currency the one the micro is pegged to (in a system where for example it hs been defined 1 monetary unit = 0,50 $), there are exchange rates micro-currency/macro-currencies which are not directly dependant (and a duplicate) of exchange rates between two macro-currencies;
- real money: especially the characteristic of "unit of account", prices, fees, taxes are to be set in that currency [es. party registration fee is 10 itrì] and not in macro-curreny while the micro-currency stands there only for fun --> the currency should not be simply a nickname of a macro-currency);
[/li][li] aleatoric money: having a "floating" value, simply for amusement. For this reason the value of the money needs to have a certain degree of daily and periodical instability, because thats what happen to every macrocurrency. But as the money should also respect the characteristic of stability outlined above; in the model to the Central Bank is given the duty to control that deviations stay inside an acceptable range, and if necessary take those actions considered necessary to stabilize the money. And again, thats what macronational Central Banks do.[/li] [/li][li] stable money: having, in a defined period, a value more or less stable. The reason is that only if theres certainty and trust on its value (accepted a defined floating range) it can be really used for transactional purposes, and not simply as portmanteau while the real price is in a macro-currency. For example, a micronation could decide to establish a taxation system but as the external payments are due in a macro-currency, the government need to rely on a stable value in order to be able to set taxes in the micro-currency and not in a macro-currency , otherwise it cant be sure if the amount collected is sufficient for its needs. Similarly citizens have to be sure that there wouldnt be great difference in the value (both in the short, daily, period and in the medium-long), otherwise they may have to pay for that fixed amount of micro-currency a lot more in term of macro-currency they are supposed to. And both need to be sure that there wouldnt be great difference in value in receiving or doing a payment a day or another. The main conclusions of this reasoning are: - the money should be defined in order to be as stable as possible, inside an accepted range of deviations (which can be changed soetimes);
- as the Government has the interest that the value of the money (the deviation) would not excessively fall, while the citizens that wouldnt excessively rise, and these preferences are contrasting; the model need an independent authority (typically the Central Bank) which has to control and, if its necessary, to stabilize the money in the best interest of all interest-holders.
[/li][/ul] (It's not an economy-based money in the macro-meaning because we have to be honest, there's no chance for a micronation to develop an economic system (apart from those with D&D-style or Age of Empires...). But a money with the above characteristics may also be able to encourage exchanges of good and services (real) among citizens because they all have a standard money.) Here's the graph of the monetary value ( M) in the model. Explanation will follow... I'm wondering if someone could understand it (and it's uses) before . ;D That suits also your currency definition (which is λ while the value mλ), better uderstanding of it will explain how d (which is reflected on M) is affected. Intuition says that d should be certainly stable in the short period, so M' it's not necessary, with θ in proximity to 0, than M=m; while in your previous definition which pegged the louis to a fixed (and didn't met all the proprieties) L/$ M=mλ --> θ=1. Graph:Forumlas:(Explanation and a better presentation will follow)
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Hooligan
Squirrel King of Arms; Cunstaval to Maricopa
Posts: 7,325
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Count Since: 9-8-2012
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Post by Hooligan on Mar 7, 2009 23:50:13 GMT -6
In the interests of keeping the thread on-topic, I'll answer a couple of E.S.'s questions here about our (admittedly a bit, well, Talossan) basis of currency.
Firstly, the value of a louis is pegged at the price of a glass of beer sold at Mr. Fritz's (one of the U.S. Consulates). At last notice, this was $1.25 US, and the size of the glass was reckoned at (am I right, Fritz?) ten ounces. We consider Sir Fritz to be a generous pourer for the money, so the actual value of the Louis is 8 ounces (a "half-pint" in honour of our one-time King whose name the currency bears) of Miller Genuine Draft (which was the most popular beer among the 40,000 Cestours at the time the basis was decided).
Thus, it may cost you more than a lou to get a half-pint of Guinness, and it might be a bit less to get yourself the same amount of Hamm's -- not all beer is created equal. Just as it costs more in any nation's currency to buy a fire truck than a pickup truck. And of course, the hard-currency (paper and coin) form of Talossan currency can be used to buy anything, not just beer. I mean, if you really need something else. I suppose it's been known to happen.
As you point out, E.S., any business or private person is welcome and invited to accept Talossan currency in trade for goods or services, and as the economic system of the Kingdom gets underway, we hope, certainly, that the citizens of the nation will use it to exchange monetary amounts between themselves in exchange for items given in trade. The plan has long been that Talossan currency would be distributed (and of course redeemed on its return) by the Royal Bank & Post in exchange for its equivalent in either beer or the currency of any other nation. For example, a citizen who wishes to have four louise to put in his pocket would send a $5US bill to the RB&P and would receive four genuine Talossan louise in exchange. If he or she sold their stereo system to a fellow Talossan (or anyone else who happened to want to pay for the thing in louise), the proceeds of the sale could be sent back to the RB&P for redemption and fair conversion into any other currency of the world, less the costs incurred (of course). In the meantime, while Talossan currency is in circulation, the Ministry of Finance (controlling the RB&P) has boatloads of foreign currency at hand, being invested wisely, thus growing this nation's treasury like a weed.
We have some colourful slang for our (as-yet unavailable) currency. Sir Cresti had to convince me not to provide an entire section on that slang in the Complete Guide to the Grammar and Usage of the Talossan Language, but I'm sure I have the text laying around here somewhere. Anyway, ....
Since one function of a consulate is to convert money from one nation's currency into another, the Kingdom considers all bars to be potential Talossan consulates (like Mr. Fritz's), since it is there that the money from the nations of the world is received in exchange for its equivalent in the reserve of Talossan currency (beer), which has thankfully been spread all over the world to our nation's consulates, would-be consulates, and banks masquerading as liquor stores.
While this Talossanity of currency may not provide a very good model, or fit into your scholastic formulae, it hasn't not worked even once yet!
Hooligan
P.S. For those who don't know, the louis is divided into 60 bence (bence is the plural of "bent", the smallest unit of Talossan currency). Sixty was chosen for a couple of reasons -- firstly, because it can be divided by 2, 3, 4, 5, 6, 10, 12, 15, 20, and 30, making for plentiful choices for coins, and second because 60 is one more than that über-Talossan number 59, so when counting out your bence, you get to that magic number and then "skip to the lou".
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Üc R. Tärfâ
Talossan since 3-8-2005
Deputy Fiôván Secretary of State
Posts: 760
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Post by Üc R. Tärfâ on Mar 8, 2009 3:14:19 GMT -6
Firstly, the value of a louis is pegged at the price of a glass of beer sold at Mr. Fritz's (one of the U.S. Consulates). At last notice, this was $1.25 US, and the size of the glass was reckoned at (am I right, Fritz?) ten ounces. We consider Sir Fritz to be a generous pourer for the money, so the actual value of the Louis is 8 ounces (a "half-pint" in honour of our one-time King whose name the currency bears) of Miller Genuine Draft (which was the most popular beer among the 40,000 Cestours at the time the basis was decided). So, correct me if I'm wrong, if I call λthe definion made by law of the good (or a certain quantity of it) the monetary unit is pegged to and mλ the the value of λ the day it has been defined, the historical pegging value (e.g.: currently for the republican itrì they're λ=1gr.silver and m λ=€ 0,3511); for the louis they should be: - λ=half-a-pint of Miller Genuine Draft (at Sir Frit's)
- mλ=$ 1,25 (assuming that that was the price when you adopted the definition).
Formula no.1 is the first definition or nominal value of the money, where d is a variable independent from the model itself (but dependent to the price of to good on the market chosen as reference, the London Bullion Market for Silver in the Republic and Sir Frit's in the Kingdom) which stands for the deviation of m from mλ: how much more or less value the money has now (time t) in relation to λ which has been chosen in the past (time t 0). So d represents the floating component of the value, while λ the fixed one (as adopted by law); in the louis case I don't think that d will be as variable as in the itrì: it will be affected by 3 factors: (1) US Inflation (2) brewery decisions and (3) Sir Frit's decisions, but the last 2 are under the inluence of the 1st clearly. However it's evident that in the short period louis d will be null, making the currency almost perfectly stable, and it will change only in the medium-long one. e.g.: if at t+1 Sir Fritz's sell half-a-pint of that beer at $ 1,50, then m t+1= $ 1,50 = $ 1,25 [m λ] + $ 0,25 [d] As it stands now, M[/b], which is the real value (whose definition is formula no.4) for the louis is perfectly equal to m (which is a component of M) becasue there's no need to have c, =0; where c is the correction made by the Central Bank in order to mantain M inside a range of deviations to keep the money as stable as possible (and as permitted by the aleatoric quality it should have), policy of deviation-targeting implemented by the Central Bank using no.7 with a fixed stabilty coefficient that goes from 0 (where M=m λ) to 1 (where M=m). In that case as your money is already stable (too much maybe), the Royal Bank is following a policy of θ=1; the louis will move along the m-line (green) in the medium-long period, while in the short one it's expected to stay put. [iThe condition in that the RB&P has to control prices at sir Fritz's and then inform the citizens (and apply) of the appreciation (or more difficult, of the depreciation).[/i] Actually, as you can see, it's perfectly readable (and understood) by the model That's similar to the plan I'm projecting now... Post them in the linguistic board!
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Post by Owen Edwards on Mar 8, 2009 9:09:07 GMT -6
The only correction I might offer would be that the RB&P doesn't really control prices at Sir Fritz's; so you may have to add that variable.
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Üc R. Tärfâ
Talossan since 3-8-2005
Deputy Fiôván Secretary of State
Posts: 760
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Post by Üc R. Tärfâ on Mar 8, 2009 9:16:16 GMT -6
Thanks for the comment Owen, I'll appreciate that you read it.
The only variable controled by the Central Bank is θ (and "indirectly" λ which is defined by law) , prices at Sir Fritz's influence d. (The only task of the RB&P is to control prices at Sir Fritz's in order to know how much is d (an m)).
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Post by Owen Edwards on Mar 8, 2009 9:21:57 GMT -6
Ah, so your model simply implies that, outside of its own formulae, the Royal Bank would, if it is being sensible, seek to be in touch with what Sir Fritz's prices are at at one time. Cool.
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Hooligan
Squirrel King of Arms; Cunstaval to Maricopa
Posts: 7,325
Talossan Since: 7-12-2005
Motto: PRIMA CAPIAM POCULA
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Count Since: 9-8-2012
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Post by Hooligan on Mar 8, 2009 17:18:27 GMT -6
Correct. If Sir Fritz raises (or lowers) his prices, then the cost of obtaining louise from the RB&P would be adjusted accordingly. What this means for speculators, who receive louise for $1.25US and then turn around and sell them back to the RB&P at $1.50US after Sir Fritz raises his prices, well, we didn't think that far ahead, perhaps. For example, if Sir Fritz takes in a boatload of louise for selling the good stuff, and has them sitting in his cash register to be redeemed at any time to the RB&P for U.S. dollars, and then he raises his price before sending them in for redemption, can he redeem all the louise for his new price? Probably not. But hey, all the details are for other people to figure out. I only started us down this road, and then I promptly suckered someone else into being PM. :-)
Hooligan
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Sir C. M. Siervicül
Posts: 9,636
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Post by Sir C. M. Siervicül on Mar 9, 2009 8:11:46 GMT -6
Yeah, some of the details were waiting till we were closer to being able to actually produce currency, which is expensive. But we'll probably need some limits on the ability to exchange louise for dollars, and we definitely need to further discuss with Sir Fritz the terms of redeeming them for beer.
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Üc R. Tärfâ
Talossan since 3-8-2005
Deputy Fiôván Secretary of State
Posts: 760
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Post by Üc R. Tärfâ on Mar 10, 2009 5:54:09 GMT -6
Correct. If Sir Fritz raises (or lowers) his prices, then the cost of obtaining louise from the RB&P would be adjusted accordingly. What this means for speculators, who receive louise for $1.25US and then turn around and sell them back to the RB&P at $1.50US after Sir Fritz raises his prices, well, we didn't think that far ahead, perhaps. Yeah, some of the details were waiting till we were closer to being able to actually produce currency, which is expensive. But we'll probably need some limits on the ability to exchange louise for dollars Well, your position is not as bad as it seems, because you've a great advantage: your d doesn't float freely, but it's artificially determinated by an indipendent authority of course, but still pre-determinated. In this way the RB&P is able to know raisings of d before they'll happen (of course if Sir Fritz's has constant communications with the Central Bank), and it will be able to take those measures necessary to grant redemption in due time. Firstly, it can be fixed a limits to daily possibile redemptions for a limited period following the appreciation. However if we suppose that the citizens are not using louis for speculative purposes, it's difficult that the RB&P will find itself in liquidity-problems as not all thre citizens wil ask for immediate redemptions of all their deposits. However to protect itself form appreciation problems, can be established a conversion fees (for example 0.25 louis) applied by the RB&P to the deposit in macro-currency (conversion from macrocurrencies to louis) made by the citizens in the RB&P; those fees (which are not converted in louis to the citizen) will be collected in a special a separate found that will be used only to compensate redemptions of louis. [Maybe a sum of the reserve can be invested in gold and by speculating on its value (which currently have an appreciatin trend), the difference will be alloted in that special fund] EDIT: The Government may also decide to destinate to this a fund a part (even small) of its revenue (electoral fees). Of course they should be redeemed to their current value (and not the histopric one); but there're two requirements: (A) That Sir Fritz's constantly inform the RB&P of the amount of louis he has, so the Bank can forsee and take those measure necessary for the redemption of those louises, (B) Establishiment of the fund above.
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Üc R. Tärfâ
Talossan since 3-8-2005
Deputy Fiôván Secretary of State
Posts: 760
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Post by Üc R. Tärfâ on Mar 10, 2009 12:28:59 GMT -6
I've made a scheme to outline my previous post: Yellow arrows are flows in macro-currencies. Green arrows are flows in louis Black arrow is the flow of information between Sir Fritz and the RB&P (that should be constant) Solid arrows are the operation at period t Interrupted arrows are the operation at period t+1 The total of the M1 (the physical money) in circulation, should be equal to the Reserve valued with the historical exchange rates (RB&P knows how many louis have issued for each exchange rate)
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Sir C. M. Siervicül
Posts: 9,636
Talossan Since: 8-13-2005
Knight Since: 7-28-2007
Motto: Nonnisi Deo serviendum
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Post by Sir C. M. Siervicül on Mar 11, 2009 8:03:41 GMT -6
Great flowchart, Üc. I think this'll be quite helpful.
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Post by Róibeard Laira on Mar 12, 2009 10:04:19 GMT -6
The issue of price increases of the pegged commodity can be solved if we understand that the price of a louis in US dollars will probably rise at the normal inflation rate of the pegged commodity in US dollars. So the Minister of Finance merely has to invest the foreign currency reserve in a low-risk portfolio that at least keeps up with inflation. US government treasury inflation-protected securities should do the trick: www.treasurydirect.gov/indiv/products/prod_tips_glance.htmEven so, I think a redemption security fund in addition to the reserve is a good idea. These don't necessarily need to be kept in separate accounts, but should probably be book kept as separate line items. I think a conversion fee should only be applied when converting louis back to foreign currency, not when buying louis in the first place. We don't want to discourage people from converting their money to louis. And perhaps Talossan consulates can have the fee waived for louis that were redeemed for the pegged commodity.
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Post by Róibeard Laira on Mar 12, 2009 10:47:58 GMT -6
And in the event of a crisis we could always suspend foreign curreny redemption and only allow redemption of louis for the pegged commodity of which I expect any Talossan Minister of Finance would have an extensive private reserve.
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Üc R. Tärfâ
Talossan since 3-8-2005
Deputy Fiôván Secretary of State
Posts: 760
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Post by Üc R. Tärfâ on Mar 12, 2009 11:18:40 GMT -6
The issue of price increases of the pegged commodity can be solved if we understand that the price of a louis in US dollars will probably rise at the normal inflation rate of the pegged commodity in US dollars. That's true if the economic models describe perfectly the reality. However that's not what happens. The inflation rate measures the appreciation (or depreciations, a deflation) of a group of goods, and it's not possible to applicate directly its change to the good. The appreciation of the single good are not directly linked to the inflation rate, its price it's composed of many factors and subject to many decisions taken by different subjects (and inflation it's measured ex-post). That's why in the bar outside my faculty one caffé it's 0.60 or 0.70 or 0.80 or even 0.90€. The louis, as far as I understand, it's pegged to the price of half-a-pint of Miller Genuine Draft at Sir Frit's, not generically to a commodity. There's a huge different, as far as what should concern the RB&P, the value-maker it's Sir Fritz (with this definition of the currency, of course). You're too optimistic. I agree that's a good investment, but it's practicable by the RB&P? I think not. Of course! The point is: if we move the fee from $->L to L->$, Sir Fritz's will recive for the beers he sold LESS than its real price. What Sir Fritz's should have to do with that large quantity of notes and coins? The pegged commodity it's simply a value-reference, not a real reserve of it. Unless the RB&P buy before large quantity of beer and Sir Fritz's write on a book how many glasses has been buyed, and each time someone goes to his bar and pay with louis, he cancel those glasses from his book. But in this case louis are ONLY redeemable (?does it exist?) phisically in his bar... (A mixed system can functions, some money conserved by the bank and some to pre-buy beer... but in this case Sir Fritz's will have to recive in advance sums and destroy the louis he recive). And in the event of a crisis we could always suspend foreign curreny redemption and only allow redemption of louis for the pegged commodity of which I expect any Talossan Minister of Finance would have an extensive private reserve. Half-a-pint glasses of beer sent around the world?
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